Myanmar investment law a setback?

Myanmar’s keenly awaited new investment law might be stricter than expected, after a draft leaked to the media showed that it contains various protective elements.

The new law, which is in fact an amendment of the existing foreign investment law of the reformist country, is currently being discussed in parliament and could be signed into law by Myanmar’s president Thein Sein this or next month.

The draft, which has been obtained by news agency Reuters, shows elements that clearly limit foreign investment in certain sectors, including small and medium industries and enterprises, agricultural and livestock businesses being carried out by local business people, and retail. In these sectors foreign investment will be banned, and in most other sectors 100 per cent of foreign ownership will be restricted.

Analysts have already labelled the new law “retrograde” and “protectionistic”, aimed at sheltering domestic markets and inhibiting the impoverished country’s future socioeconomic growth.

“These latest updates to the foreign investment law may do little to encourage the confidence of foreign investors”, the Democratic Voice of Burma, a non-profit media organisation run by Myanmar expatriates and based in Oslo, Norway, critisised.

“Protecting the domestic market in the short term will not result in healthy, long-term economic growth”, the organisation said.

The foreign direct investment amendment bill builds on existing legislation enacted in 1988 and is tipped to permit foreign investors to expand their presence in joint ventures by allowing them to invest within the public or private sector. The bill is also likely to extend tax holidays to five years, and that period can be extended if there is some “benefit to the country.”

One proposed article would allow 100 per cent foreign investment only for enterprises that involve high-tech industries beyond the reach of domestic investors. Currently all firms can be 100 per cent foreign-owned.

For others sectors except those banned for FDI, the bill allows foreign investors to set up joint ventures with the government or citizens with at least 35 per cent of the total capital.

According to the FDI bill, foreigners will be able to lease land for 50 years extendable by two 10-year terms, depending on the nature of the business and the size of the investment. The practice until now has been 30-year leases renewable twice, by five years each time.

Myanmar’s keenly awaited new investment law might be stricter than expected, after a draft leaked to the media showed that it contains various protective elements.

The new law, which is in fact an amendment of the existing foreign investment law of the reformist country, is currently being discussed in parliament and could be signed into law by Myanmar’s president Thein Sein this or next month.

The draft, which has been obtained by news agency Reuters, shows elements that clearly limit foreign investment in certain sectors, including small and medium industries and enterprises, agricultural and livestock businesses being carried out by local business people, and retail. In these sectors foreign investment will be banned, and in most other sectors 100 per cent of foreign ownership will be restricted.

Analysts have already labelled the new law “retrograde” and “protectionistic”, aimed at sheltering domestic markets and inhibiting the impoverished country’s future socioeconomic growth.

“These latest updates to the foreign investment law may do little to encourage the confidence of foreign investors”, the Democratic Voice of Burma, a non-profit media organisation run by Myanmar expatriates and based in Oslo, Norway, critisised.

“Protecting the domestic market in the short term will not result in healthy, long-term economic growth”, the organisation said.

The foreign direct investment amendment bill builds on existing legislation enacted in 1988 and is tipped to permit foreign investors to expand their presence in joint ventures by allowing them to invest within the public or private sector. The bill is also likely to extend tax holidays to five years, and that period can be extended if there is some “benefit to the country.”

One proposed article would allow 100 per cent foreign investment only for enterprises that involve high-tech industries beyond the reach of domestic investors. Currently all firms can be 100 per cent foreign-owned.

For others sectors except those banned for FDI, the bill allows foreign investors to set up joint ventures with the government or citizens with at least 35 per cent of the total capital.

According to the FDI bill, foreigners will be able to lease land for 50 years extendable by two 10-year terms, depending on the nature of the business and the size of the investment. The practice until now has been 30-year leases renewable twice, by five years each time.